After installing VMWare Fusion 4, the guest operating system VMWare Tools requires updating, but after initiating the upgrade a dialog box displays saying that the upgrade cannot be completed.
Further information in the message indicates that the following line should be added to the Virtual Machine’s .vmx configuration file;
isolation.tools.guestInitiatedUpgrade.disable = “FALSE”
Shut the Virtual Machine down (power off) and quit Fusion, then locate the Virtual Machine in Finder, right click and choose “Show Package Contents”
Make a backup copy of the .vmx file and add the line above, I added it to the end of the file using TextEdit (ensure TextEdit is in Text mode before saving).
Restart the Virtual Machine, and the VMWare Tools upgrade should proceed correctly.